Saving money is a tough thing to do in general. But when you're in your 20s, it can be a real challenge.
Some people are fortunate enough to snag a high-paying job right out of college. But many graduates spend a good part of their 20s earning entry-level salaries and struggling with bills. If you're in that boat, then you may not have that much cash socked away by your 25th birthday.
But just how much savings should you have by 25? Ideally, by then, you should have a solid emergency fund and the start of a nest egg. But if you don't, that's okay, too.
Aim for a three-month emergency fund
If you're 25, you may have modest expenses like a rental you share with a roommate, a cheap car, and so forth. But it's still important to have a way to pay those bills in the absence of a paycheck, such as if you were to lose your job or be forced to go out on disability due to an injury.
That's why it's important to have a three-month emergency fund by age 25. If you have enough cash to cover three months of essential expenses, you may be less likely to resort to credit card debt when an unplanned bill or period of unemployment arises. And you might also be in a strong position to cover a larger expense like a car repair.
Aim for one-third to half a year's salary in retirement savings
Retirement is a period of life you should try to save for from a young age. The more time you give your savings to grow, the easier it becomes to build up a larger nest egg.
Fidelity says that by age 30, you should optimally have the equivalent of a year's salary (meaning your salary) in an IRA or 401(k) plan. So by 25, it's good to aim for somewhere between one-third of a year of pay and one-half.
But remember, even if you start funding an IRA or 401(k) at age 21 or 22 upon graduating college, you're not so far off from 25. And that means you're not getting a very large window of time for your money to grow. So don't get down on yourself if you only have enough of an IRA or 401(k) balance to equal a month or two of your current salary by 25.
A side gig could be your ticket to boosted savings
When you're in your mid-30s and you've worked your way up the ranks within your industry, it may be a lot easier to build savings. But it's hard to do the same in your early- to mid-20s. If you don't have a three-month emergency fund or one-third to one-half of a year's pay in retirement savings, do not beat yourself up. It's an accomplishment to have savings at all at that point, so pat yourself on the back if your balance isn't $0.
That said, one way to give your savings (emergency and retirement) a nice boost is to take advantage of the gig economy. You may not have enough experience to get promoted at your main job and snag a higher salary. But if you're able to supplement your income for a few years by doing things like pet-sitting or driving for a rideshare service, you can use that extra cash to build savings. And then, once your salary picks up, you can dump your side gig if it's too time-consuming or you're just plain tired of it.
Many people don't have any savings at 25. So try not to get too hung up on ideal targets. A better bet is really to just do your best to save as much as you can, and to celebrate small milestones in your savings and retirement accounts along the way.
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FAQs
By age 25, you should aim to have an emergency fund of 3-6 months of living expenses, and start regularly contributing to retirement savings to take advantage of compound interest over time, even if it's just small amounts.
How much money should a 25 year old have in savings? ›
By age 25, you should aim to have an emergency fund of 3-6 months of living expenses, and start regularly contributing to retirement savings to take advantage of compound interest over time, even if it's just small amounts.
How much should I be worth by 25? ›
The Ideal Number
| Age | Income | Net Worth |
|---|
| 20 | $25,000 | $50,000 |
| 25 | $35,000 | $87,500 |
| 30 | $50,000 | $150,000 |
| 50 | $55,000 | $275,000 |
1 more rowWe say that in order to be financially moving along in your financial journey, we want you to save 20 to 25 percent of your gross income for the future.
How much money should be in your savings? ›
It might help to see the bigger picture in an income-to-savings ratio. A rule of thumb is to set aside 50% of your income for necessities, 30% for discretionary expenses and 20% for savings.
How much should you save a month at 25? ›
Many experts agree that most young adults in their 20s should allocate 10% of their income to savings.
How much money does the average 25 year old spend? ›
Average American Spending per Day: 25-34 Years Old (Millennials)
| Average Daily Spending by Americans 25-34 Years Old |
|---|
| Groceries | $10.89 |
|---|
| Housing (Rent/Homeownership) | $34.78 |
| Utilities | $8.89 |
| Health Insurance | $6.19 |
11 more rowsYounger people are no exception. Of “young millennials” — which GOBankingRates defines as those between 18 and 24 years old — 67 percent have less than $1,000 in their savings accounts and 46 percent have $0.
How much should a 25 year old have in 401k? ›
Average and median 401(k) balance by age
| Age | Average Account Balance | Median Account Balance |
|---|
| Under 25 | $5,236 | $1,948 |
| 25-34 | $30,017 | $11,357 |
| 35-44 | $76,354 | $28,318 |
| 45-54 | $142,069 | $48,301 |
3 more rowsFeb 6, 2024
Here's how many Americans have more than $100,000 saved for retirement (by age): Age 18-24: 2.1% Age 25-34: 4% Age 35-44: 11.5%
Keep in mind, the more time your money has to grow, the more powerful it is. We suggest saving 20-25% of your gross income towards retirement.
Is saving 25 a week good? ›
If you can afford to allocate $25 of your weekly budget toward savings, your savings account balance will add up faster than you think. If you commit to setting aside $25 each week for an entire year, you'll have $1,300 in the bank. That's a lot of money and much better than having $0 saved.
What is the 50 25 25 rule in saving? ›
The 50/25/25 saving rule is an incredibly useful guideline to help manage your finances and ensure that you're putting away enough money each month. This rule suggests that you allocate half of your income to essential expenses, a quarter to discretionary spending, and another quarter to savings.
Is 20% enough for savings? ›
One popular guideline, the 50/30/20 budget, proposes spending 50% of your monthly take-home pay on necessities, 30% on wants and 20% on savings and debt repayment. The necessities bucket includes non-negotiable expenses like utility bills and the monthly minimum payment on any debt you have.
Is $1,000 in savings okay? ›
Despite the significance of having savings, however, research shows that 45% of Americans have less than $1,000 saved — and in an emergency situation, $1,000 may very well not be sufficient.
Is it good to save 1000 a month? ›
Saving $1,000 per month can be a good sign, as it means you're setting aside money for emergencies and long-term goals. However, if you're ignoring high-interest debt to meet your savings goals, you might want to switch gears and focus on paying off debt first.
Is $20000 a good amount of savings? ›
Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
Is $25,000 in savings good? ›
Although $25,000 isn't infinite, it's certainly not insignificant — anyone earning less than six figures gets sufficient emergency savings with cash to spare. If those with $40,000 salaries scaled down to a more modest four-month emergency fund, they'd have $11,680 left over to play with.
